More Troubling Stories from the Credit Crunch

Posted by: Nick Leiber on February 23, 2009

We’ve been offering strategies for dealing with the repercussions of the credit crunch for months. So a blog post today on the Huffington Post by Palo Alto Software founder and business guru Tim Berry on the ongoing human impact caught my attention.

In it, Berry talks about the bleak results of a survey he conducted last week on the effects of the credit crunch on small business owners. “The down numbers,” he writes, “aren’t likely to surprise anybody, although they do confirm the generally gloomy picture… Only 6% of the owners had loan applications approved. Another 7% have loans pending. But 36% of them applied for loans, but 64% of those who applied were rejected.”

But for Berry, it’s the stories of a handful of the 300-plus respondents with seemingly healthy businesses that are particularly telling. They include the 64-year-old owner of a five-employee 27-year-old business who says the bank refused to acknowledge his $3 million recording studio as an asset. He’s predicts he’ll have to close. Then there’s the woman whose 30-year-old concrete company has 25 employees, but couldn’t get a loan for less than $50,000. Responding to Berry’s survey, she writes (in part):

We took out a $90,000 SBA loan a few years ago and it is paid down to $17,000. We now can’t get a loan. I am heartsick. My husband and I have been married for 44 years and have been homeowners for 43 years. It looks like we will have to face bankruptcy and foreclosure even though we have been offered a contract that needs 15,000 yards of concrete.

Berry concludes: “And I think that’s what small business credit crunch really means. It’s not numbers in the abstract, and it’s not banks making bad loans: it’s banks not making good loans.”

Reader Comments

Mark

February 24, 2009 12:41 AM

I've been saying this for awhile and it's sad to see it played out in real stories. SBA loans are a crock. They don't loan against assets in your business, they take your home as collateral under a personal loan guarantee. So when things go South, they take your house and ignore your business. They only really want your house because they can sell it. They don't want to run your business nor do they want to sell it. Please list the name of your bank in the public space so other Entrepreneurs can see how they treat our "brothers."

Ilya Bodner

February 24, 2009 01:47 PM

The SBA is a joke right now. They cannot possibly help small business owners. By the time the money gets down to the rest of us, we won't have anything left for the small business owners.

Small business owners need to be reminded that there are alternatives.

Sincerely,

Ilya Bodner
Small Business Owner
Initial Underwriting Group

Stephen

March 5, 2009 12:05 PM

At the start of this entire crazy banking crisis, I tried to get an SBA loan to buy a business with a cash flow of $350K per year. The bank wanted 100% asset collateral. Why? The loan is insured by the SBA. If I had the collateral I would not need the SBA. They then lowered it to 50%, not including the business. Then the 20% down had to be vetted for 3 years. Who keeps money sitting in one account for 3 years, really, who?
The SBA is useless now. The idea was to give start-ups a chance. Now, it's all about making sure they fail by making it so expensive and costly that you do not want to do business through the SBA.

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.